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Government-sponsored enterprise (GSE)

Категорія — Учасники ринку

Government-sponsored enterprise (GSE) are quasi-state companies established by the US Congress. Their main function is to increase the inflow of loans to target sectors of the economy (agriculture, education, real estate), to increase the efficiency and transparency of these segments, the capital market, as well as to reduce the risk for investors and other providers of capital.

 

GSE does not lend directly to the public, but purchases loans in the secondary market. For example, Fannie Mae и Freddie Mac, two of the most famous GSEs, buy mortgages and issue Mortgage-Backed Securities (MBS). While these companies have implicit backing from the US government, these securities are not directly held by the government. For this reason, these securities have a higher yield than Treasury bonds, since they have a slightly higher degree of credit risk and risk of default.

 

In terms of the total volume of bonds issued by GSE companies, only the US Treasury can compete. Even one GSE company’s financial problem could lead to a downward spiral in the markets, leading to a global debt crisis in the US and worldwide. So in 2008, at the height of the mortgage crisis, the US government allocated $ 187 billion to Fannie Mae и Freddie Mac to mitigate the negative impact of the wave of defaults on the real estate market. In subsequent years, these companies returned this amount of financial assistance, but still remain closely monitored by the Federal Agency for Housing Finance.

 

Examples of GSE companies

 

  • Federal Home Loan Bank (FHLB)
  • Federal Home Loan Mortgage Corporation (Freddie Mac)
  • Federal National Mortgage Association (Fannie Mae)
  • Federal Farm Credit Bank (FFCB)
  • Government National Mortgage Association (Ginnie Mae)
  • Financial Corporation (FICO)
  • The Student Loan Marketing Association (Sallie Mae)
  • Resolution Funding Corporation (REFCORP)

 

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